India’s Union Budget for 2026–27 marks a decisive shift toward a technology-led growth model, placing information technology, artificial intelligence, and semiconductor manufacturing at the core of the country’s long-term economic strategy. Rather than incremental tweaks, the government has outlined a broad vision that seeks to combine regulatory certainty, digital infrastructure, and future-ready skills to propel India into its next phase of development.
Presenting the budget, Finance Minister Nirmala Sitharaman positioned the services sector as a central pillar of Viksit Bharat, emphasising that India’s competitive edge in technology and digital services will be critical to achieving sustained growth over the coming decades.
A major compliance boost for IT services
Among the most significant announcements for the IT industry is a sweeping reform of safe harbour rules, a move widely expected to reduce compliance friction and long-standing tax disputes.
The budget proposes a unified classification for software development, IT-enabled services, knowledge process outsourcing, and contract research related to software. These activities will now fall under a single category—Information Technology Services—and be governed by a standard safe harbour margin.
More notably, the turnover threshold to qualify for safe harbour benefits has been raised substantially, extending relief to a far larger segment of the industry. By offering greater certainty on transfer pricing and cross-border transactions, the government aims to free IT firms from prolonged litigation and allow them to focus on expansion and innovation.
For mid-sized technology companies in particular, the change is likely to improve ease of doing business and reinforce India’s reputation as a stable and predictable destination for global outsourcing.
Preparing the workforce for an AI-driven era
Beyond immediate industry relief, the budget reflects growing recognition that technological change—especially the rise of artificial intelligence—will reshape employment and skill requirements across sectors.
To address this transition, the government plans to set up a high-level standing committee linking education, employment, and enterprise. Its mandate will include assessing how emerging technologies affect jobs, recommending updates to school and higher education curricula, and strengthening teacher training institutions.
A key focus will be large-scale upskilling and reskilling of engineers and technology professionals, ensuring India’s workforce remains globally competitive as automation and AI adoption accelerate. The long-term ambition is to significantly expand India’s share in global services exports by aligning talent development with industry needs.
AI moves from promise to practice
The budget also signals a shift from viewing artificial intelligence as a future aspiration to deploying it as a practical tool of governance.
Several sectors have been identified for priority adoption, including education, agriculture, customs, and employment services. In trade and logistics, AI-enabled non-intrusive scanning systems will be expanded across major ports to speed up cargo movement while improving risk assessment and security.
In agriculture, a new multilingual AI-based platform will provide farmers with customised advisories, helping them improve productivity and manage climate and market-related risks. By using technology to bridge information gaps, the government hopes to deliver more targeted and efficient public services.
Semiconductors take strategic centre stage
Recognising the geopolitical and economic importance of chip manufacturing, the budget reinforces India’s push to build a domestic semiconductor ecosystem.
A new phase of the India Semiconductor Mission has been announced, with a sharper focus on producing equipment and materials, developing indigenous intellectual property, and strengthening supply chains. The objective is to move India deeper into the semiconductor value chain and reduce dependence on external sources in a sector critical to everything from consumer electronics to national security.
This renewed push reflects a broader effort to position India as a reliable manufacturing partner in an increasingly fragmented global supply landscape.
A long runway for data centre investments
In a move aimed at attracting global digital infrastructure players, the budget introduces a long-term tax incentive for foreign companies that use data centres located in India to serve customers overseas.
By offering a tax holiday extending well into the future, the government is seeking to anchor global data flows, cloud services, and digital operations within India. The policy also ensures that services provided to domestic users remain within the tax net, balancing investor incentives with revenue considerations.
The measure is expected to boost demand for data centres, encourage capacity expansion, and strengthen India’s position as a global digital hub.
A blueprint for technology-led growth
Taken together, the Budget 2026–27 presents a coherent blueprint for a technology-driven economy—one that blends regulatory reform, investment incentives, workforce transformation, and strategic manufacturing.
For the IT sector, it offers stability and scale. For global investors, it signals long-term commitment. And for India’s workforce, it underscores the urgency of adapting to a rapidly evolving, AI-led world.
As India looks toward its centenary of independence, the budget makes one thing clear: the country’s growth story will increasingly be written in code, chips, and data.